Project Controls · Cost Management
Earned Value Management (EVM) in Construction: The Contractor's Guide
Traditional construction accounting tells you how much money you have spent, but it cannot tell you how much physical work you have actually accomplished for that expenditure. Earned Value Management (EVM) is an international project controls methodology that integrates scope, schedule, and cost into a unified performance measurement framework.
The Core EVM Performance Metrics Explained
- Planned Value (PV): The approved budget authorized for scheduled work up to a specific date. (What we planned to do).
- Actual Cost (AC): The total realized cost incurred in completing work up to that date. (What we actually spent).
- Earned Value (EV): The quantified value of physical work actually completed, evaluated at original baseline rates. (What we accomplished).
- Cost Performance Index (CPI = EV / AC):
• CPI > 1.0: Project is executing under budget (efficient).
• CPI < 1.0: Project is experiencing cost overruns. - Schedule Performance Index (SPI = EV / PV):
• SPI > 1.0: Project is ahead of schedule.
• SPI < 1.0: Project is behind schedule.
Frequently Asked Questions
How does EVM prevent disputes on commercial projects?
EVM provides objective, mathematically verifiable progress metrics. By tying contractor payment certificates strictly to physical Earned Value (EV) rather than arbitrary monthly percentages, project owners eliminate front-loading and premature contractor overbilling.